Global semiconductor revenue had been declining since 2H22 and reached its bottom in Feb 2023.

Strong upswing from 2024 onwards

Global semiconductor revenue had been declining since 2H22 and reached its bottom in Feb 2023. This decline is due to: 1) diminished demand from smartphone and PC users; and 2) a downturn in spending by data centers and hyperscalers amid sluggish economic conditions. However, it has recovered significantly on a MoM basis since June 2023 and is backed by positive YoY growth in November 2023.

Global sales in November 2023 reached US$48bn, increasing 5.3% YoY. In cumulative 11M23, global sales decreased 12.8% YoY to reach US$470.6bn. For the whole of 2023, the global semiconductor market is anticipated to contract 9.4% YoY, reaching US$520bn, according to World Semiconductor Trade Statistics.

VNDirect expects that the semiconductor industry will recover in 2024 thanks to the resurgence of electronic device sales as macroeconomic conditions improve. According to World Semiconductor Trade Statistics (WSTS), the global semiconductor industry is expected to show a robust recovery with growth of 13.1% YoY in 2024, reaching a valuation of US$588bn. From a regional standpoint, all markets are poised for ongoing expansion in 2024. The US and Asia Pacific, in particular, are forecasted to demonstrate significant double-digit growth of 22.3% and 12% YoY, respectively.

In the long-term, VNDirect believes that the global semiconductor industry will record robust growth on the back of the increasing demand for electronic devices, electronic vehicles, data centers, and new technologies like IoT, AI, and 5G. Global semiconductor sales are expected to grow at a CAGR of 9.8% in the period of 2024–2029 and reach a valuation of over US$1,000bn in 2029.

The Covid-19 pandemic and restrictions

Because of the fragmentation and regional specialization of the global semiconductor supply chain, as mentioned above, the outbreak of the COVID-19 pandemic caused value chain disruption and led to supply shortages. In addition, geopolitical risks, especially the US-China tension, have also increased concerns about supply disruption.

In October 2022, the US announced regulations about restricting AI chip access, design limit ations, constraining the ability to produce advanced chips, and restricting the capability to produce equipment mainly from China’s access. The US also worked with the Netherlands and Japan to align those countries’ export control policies with the US with respect to sharing semiconductor and semiconductor manufacturing technology with China. In August 2023, China implemented policies to restrict the export of rare metals for semiconductor production. Then, in Nov 2023, the US broadened restrictions on semiconductor exports to China. As the geopolitical tension has elevated, we see that firms globally are tending to diversify their supply chains with “China 1” or “Taiwan 1” production plans.

In 2021-2022, total global FDI into the semiconductor industry reached over US$175bn. This is the highest FDI inflow level in this industry in the past 20 years. In the period of 2003-20, the world’s top destination country for semiconductor FDI was China, attracting a total of US$96.7bn-worth of projects, double that of the US over the same period. But that situation has flipped in recent years. There has been growth in FDI in the US and some other countries like India, Ireland, Germany, Japan, Malaysia, and Singapore. In 2021- 2022, the US attracted US$52.8bn-worth of semiconductor FDI, while China saw just US$6.6bn.

Southeast Asia will make further headway in ATP market

For the semiconductor assembly and test market, given the influence of geopolitics, technological development, and skilled labor shortages, leading IDMs and OSAT companies have begun to invest more in the Southeast Asia market. Thus, Southeast Asia is projected to play an increasingly important role in the semiconductor assembly and test market, which will be the key areas that deserve special attention in the future development of this field.

According to IDC, Southeast Asia will make further headway in OSAT, achieving a 10% global share by 2027. Meanwhile, Taiwan’s share is predicted to decline to 47% in the same year, from 51% in 2022.